Heinz Credits Marketing Strategy For 19% Profit Hike

H.J. Heinz on Thursday reported strong double-digit growth in its second fiscal quarter, thanks to "creative, targeted marketing in support of our new product innovation," per the company. Net profit rose 19%.

Heinz increased its marketing spend by 23% in the quarter, and sales increased 13%, to $2.52 billion. Net income rose 15%, to $227 million. From January to August of this year, Heinz spent $21.4 million compared with the $20 million it spent in all of 2006, according to Nielsen Monitor-Plus.

"We have now invested in double-digit marketing increases in five of the last six quarters," Michael Yeomans, communications manager, tells Marketing Daily by e-mail. "Importantly, we are getting good returns on this investment, particularly in the U.K., where we supported three new soup ranges with an extensive print and outdoor campaign, helping us to achieve 23% sales growth in the quarter and our highest category dollar share ever.

Operating income in the second quarter rose 9.9% to $421 million despite the incremental marketing investments and the impact of higher commodity costs affecting the entire food industry, the company reported.



The strong growth in operating income reflected broad-based profit growth in Europe, Asia/Pacific, and North American Consumer Products, driven by strong volume, net price gains, the success of productivity initiatives and Heinz's increased investments in marketing and R&D to drive innovation and growth, especially in its top 15 brands.

Heinz has an integrated campaign ready for next week's launch of Smart Ones Fruit Inspirations, the first such meals to contain a half-serving of fruit. The campaign for Smart Ones Fruit Inspirations includes a media tour featuring celebrity chef Devin Alexander and a new Web site, eatyourbest.com. "Combined, our Smart Ones, Boston Market and Weight Watchers meals ranges grew 31% in the second quarter," Yeomans notes.

He said the company is working hard to build brand awareness in Canada for its Renee's Gourmet chilled dressings brand, which it bought over a year ago. "We are using TV to drive trial in the country's faster-growing Western provinces and Quebec in order to build the brand outside of its stronghold in Ontario," Yeomans says.

"For the eight weeks ending Sept. 29 we achieved a 74.3 dollar share of the refrigerated salad dressing category, a gain of 2.3 points versus a year ago on the strength of our "Blame Renee" TV commercial." In it, a woman licks her plate after finishing her salad -- to the surprise of those around her. Heinz also did heavy in-store sampling over the spring and summer with events in some 2,000 stores.

Yeomans says a disproportionate portion of growth is coming from emerging markets, which grew sales 24% in the quarter. "One of our fastest-growing brands in the company is Long Fong in China, a premium range of dim sum, rice balls, hot pot soups and steam bread," he says. There, Heinz is driving trial with extensive in-store sampling and by feature Zhang Yining, reigning Olympic table tennis champion and Chinese national hero, on packaging and in new TV commercials that recently began airing.

"Our relationship with Ms. Yining is effectively driving brand awareness and trial as we head into the summer Olympic Games in Beijing," he says.

Increased investment in marketing also led to a 26% sales growth in the company's global infant nutrition business. Yeomans cites the strength of Heinz' strategy to "up-age" the category into biscuits, beverages and toddler meals and snacks.

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